Corporate Issuers — CFA® Program Level I

Question 1

An analyst covering Lukwago Sugar Estates, a listed sugar producer financed with bank loans and common shares, summarizes what each stakeholder group mainly seeks from the company. Which summary is least likely accurate?

Accepted Answer

Lending banks: a share of extra profit if expansion projects succeed

Answer

Employees: fair pay, safe working conditions and job security

Answer

Suppliers: prompt payment and a stable, long-term customer relationship

Question 2

Which of the following comparisons of business structures is accurate?

Accepted Answer

The general partner of a limited partnership bears the same kind of personal liability as a sole proprietor.

Answer

Shareholders of a corporation, like general partners, usually run the business's day-to-day operations themselves.

Answer

A corporation's profits, like a general partnership's, are normally taxed only once, at the level of the owners.

Question 3

The Mendieta family owns 56% of the shares of Mendieta Bottling Group, a listed company; outside investors own the rest. Mendieta Bottling agrees to buy all of its glass bottles from a glassworks owned privately by the family, at prices well above those offered by other suppliers. This arrangement most likely illustrates a conflict between:

Accepted Answer

the controlling shareholder and minority shareholders

Answer

managers and shareholders

Answer

shareholders and creditors

Sample questions